The underperformance of South Africa’s agricultural sector in 2019 was largely caused by two factors: drought and biosecurity (specifically foot-and-mouth disease and African swine fever). This underperformance in agrimarkets was a result of two factors, namely lower agricultural output because of drought and subdued trade activity because of a ban on the exports of animal products following the outbreak of foot-and-mouth disease.
What to expect in 2020
Will 2020 be any different? It is hard to tell at this point as the drought and foot-and-mouth disease remain challenges in the country. Exhibit 1 highlights the areas of South Africa that are currently experiencing drought, as well as rainfall expectations over the next two months.
The areas currently experiencing drought are mainly the Eastern Cape, Northern Cape, North West, Limpopo and parts of the Free State (the Western Cape is a winter rainfall area, hence the province recorded a lower soil moisture level at this time of the year). Another important factor is that even for those areas that currently have sufficient soil moisture, the rains arrived later than normal.
This meant that summer crop plantings were also delayed across the country. Fortunately, plantings have now been completed in Limpopo, Mpumalanga and KwaZulu-Natal. The feedback from various farmers in these regions suggests that the intended area for summer crops was successfully planted.
Late plantings at risk
In the Free State, North West and the Eastern Cape, maize and sunflower seed plantings were still underway in the week of 10 January 2020. About 80% of the intended area for maize has been planted for the aforementioned areas, and 90% for the country overall. Sunflower seed is at just over 50% of the intended area.
In a normal season, maize plantings would have been completed across South Africa by mid-December and sunflower seed by end of December/early January. Plantings that occur beyond this period, as in the current season, risk being affected by frost later in the season. This, in turn, would negatively affect crop yields.
Another key risk to keep in mind is the possibility of below-normal rainfall in most parts of South Africa between January and March 2020, which has been highlighted by the South African Weather Service (Exhibit 1). In the event of such weather conditions, crop yields would be affected negatively. The late plantings also mean that crop pollination might not occur around February as is typically the case, but only around March in some areas.
Biosecurity and FMD
The foot-and-mouth disease outbreak at the end of 2019 remains a key challenge in the country and exports of animal products have halted as a result. Beef exports of roughly $140 million, which South Africa exports annually in a normal year, are at risk.
Moreover, the response of South Africa’s trading partners to the foot-and-mouth disease outbreak of early 2019 extended to sectors such as the wool industry. China, which imports on average 71% of South Africa’s wool, imposed a ban for months which weighed on the industry. The wool sector’s exports are worth twice that of beef in value terms, averaging $308 million over the past five years and all this was at risk during the ban.
The South African government and private sector participants will be collaborating in the coming weeks to find a workable solution to this challenge. At this point, the government has placed a ban on auctions in the country to limit livestock movement. – Wandile Sihlobo, Agbiz
Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.